Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 7

Consider a competitive market served by many domestic and foreign firms. The domestic demand for these firms' product is Q d = 600 - 2 P. The supply function of the domestic firms is Q SD = 200 + P, while that of the foreign firms is Q SF = 250.
a. Determine the equilibrium price and quantity under free trade.
b. Determine the equilibrium price and quantity when foreign firms are constrained by a 100-unit quota.
c. Are domestic consumers better or worse off as a result of the quota?
d. Are domestic producers better or worse off as a result of the quota?